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Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2025 (7) TMI AT This

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2025 (7) TMI 1377 - AT - Income Tax


ISSUES:

    Whether the assessee, being a cooperative society but not a cooperative bank, is eligible for deduction under section 80P(2)(d) of the Income Tax Act, 1961 on interest income earned from deposits with cooperative banks.Whether the provisions of section 80P(4) of the Income Tax Act, 1961 exclude the assessee from claiming deduction under section 80P(2)(a)(i) when it is neither a primary agricultural credit society nor a primary cooperative agricultural and rural development bank.Whether interest income earned by a cooperative society from investments in cooperative banks qualifies for deduction under section 80P(2)(d) despite the cooperative bank being distinct from a bank under the Banking Regulation Act, 1949.

RULINGS / HOLDINGS:

    On the issue of eligibility for deduction under section 80P(2)(d), the court held that "a co-operative bank is in the nature of co-operative society," and therefore, "the interest earned by the assessee from the co-operative bank is eligible for deduction under section 80P(2)(d) of the Act."Regarding the applicability of section 80P(4), the court concluded that since the assessee society is neither a primary agricultural credit society nor a primary cooperative agricultural and rural development bank, "Section 80(P)(4) shall not be applicable," and the assessee is entitled to exemption/benefit under section 80P(2).The court upheld that the disallowance of deduction under section 80P(2)(d) by the Assessing Officer was unjustified and deleted the disallowance of Rs. 55,31,05,883/- in respect of interest income earned from cooperative banks.

RATIONALE:

    The court relied on the statutory framework of section 80P of the Income Tax Act, 1961, which provides deductions to cooperative societies on income earned from specified sources, including interest from other cooperative societies under section 80P(2)(d).Judicial precedents were extensively applied, including the Supreme Court decision in Kerala State Cooperative Agricultural and Rural Development Bank Ltd. v. Assessing Officer, which clarified that a cooperative bank is a cooperative society and not a bank under the Banking Regulation Act, 1949, thus entitling it to deduction under section 80P.The court distinguished earlier conflicting judgments by emphasizing factual differences, particularly that the interest income in the instant case was solely from cooperative banks, unlike cases involving mixed income from cooperative and nationalized banks.Additional reliance was placed on recent Gujarat High Court rulings and coordinate benches of the ITAT that consistently upheld the availability of deduction under section 80P(2)(d) for interest income earned by cooperative societies from cooperative banks.The principle of judicial discipline was invoked to follow the coordinate bench decision in Jaimuni Sahkari Patpedhi Maryadit, which aligned with the Supreme Court's authoritative interpretation.

 

 

 

 

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